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Newell Rubbermaid Inc. v. Storm

Court of Chancery of Delaware

March 27, 2014

NEWELL RUBBERMAID INC., Plaintiff,
v.
SANDY STORM, Defendant.

Date Submitted: March 11, 2014

James W. Semple, Esquire and Jason C. Jowers, Esquire of Morris James LLP, Wilmington, Delaware, and Joel R. Hlavaty, Esquire and William P. Dunn, Esquire of Frantz Ward LLP, Cleveland, Ohio, Attorneys for Plaintiff.

John D. Demmy, Esquire of Stevens & Lee, P.C., Wilmington, Delaware, and Gary D. Melchionni, Esquire and Theresa M. Zechman, Esquire of Stevens & Lee, P.C., Lancaster, Pennsylvania, Attorneys for Defendant.

MEMORANDUM OPINION

NOBLE, Vice Chancellor

I. INTRODUCTION

Plaintiff Newell Rubbermaid Inc. ("Newell" or the "Company") seeks a temporary restraining order ("TRO") against a former employee, Defendant Sandy Storm ("Storm"). It wants to enjoin her actions that may violate the non-solicitation and confidentiality covenants of restricted stock unit ("RSU") agreements to which she assented through a third-party website less than a year before her departure from Newell. The core issues involve the enforceability of electronic "clickwrap" agreements and whether RSUs that would not vest for one year constituted adequate consideration for the restrictive covenants when Newell, without cause, could terminate her employment, which would result in the forfeiture of the RSUs.

Agreements may, of course, be made online. A clickwrap agreement is an online agreement that requires a "webpage user [to] manifest[] assent to the terms of a contract by clicking an 'accept' button in order to proceed."[1] The RSU agreements to which Storm assented and which Newell seeks to enforce were clickwrap agreements.

For the reasons that follow, the Court concludes that clickwrap agreements and the RSUs at issue are enforceable under Delaware law.[2] Newell has more than a colorable claim that Storm has violated the restrictive covenants and that it will suffer irreparable harm in the absence of interim injunctive relief. Thus, Newell's motion for a TRO against Storm is granted.

II. BACKGROUND

A Newell subsidiary manufactures and sells infant and juvenile products under its "Graco" brand. Graco sells its products through various retailers, including Target Corporation ("Target"). Storm worked for Newell and its subsidiaries as an employee in various capacities from June 1, 2000, until her voluntary resignation from Newell Sales & Marketing on January 7, 2014. Storm was part of a 17-person office in Minneapolis, Minnesota, which was dedicated to servicing Target.

Storm was promoted to "Director of Sales – Target" effective as of June 1, 2011. As a result of that promotion, she became eligible to receive bonuses in the form of RSUs granted under a document entitled "Newell Rubbermaid Inc. 2010 Stock Plan."[3] To accept the RSUs awarded to her, Storm was directed to a website operated by Fidelity Investments ("Fidelity"), which maintained investment and retirement accounts of Newell's employees. The instructions on Fidelity's website prompted Storm to "accept" the 2011 RSUs by clicking on an "accept" button.[4]Storm states that a pop-up screen then appeared with a lengthy scrolling message which discussed the RSU award and that when she clicked the "accept" button, she thought she was agreeing to certain terms relating specifically to her grant of RSUs.[5] The 2011 award did not contain a confidentiality or non-solicitation provision, [6] although it did refer to the 2010 RSU plan which explicitly stated that Newell's board of directors, in its sole discretion, could condition the grant of an award upon those provisions.[7]

Around February 2012, Storm again received written notice from Fidelity that she had been awarded additional RSUs, and she again returned to the Fidelity website to accept them.[8] As before, the provisions of this 2012 award did not contain non-solicitation or confidentiality clauses.

In February 2013, Storm was granted her third award of RSUs. She accepted half of the RSUs, which were performance based, on March 18, 2013 and the other half, which were time based, on April 1, 2013. The RSUs, as accepted, were subject to the Newell Rubbermaid Inc. 2010 Stock Plan 2013 Restricted Stock Unit Award Agreement (the "2013 Agreements").[9] Under these agreements, performance-based RSUs vest three years from the award date and time-based RSUs vest ratably in one-third increments on the first, second, and third anniversaries of the award date.[10] However, if the recipient of the RSUs is terminated from employment by Newell for any reason other than death, disability, or retirement, then the RSUs shall be forfeited and no portion shall vest.[11] The RSUs also grant the recipient a cash equivalent to the value of the dividends she would have received had she been the actual owner of the number of shares of common stock represented by the time-based RSUs in the recipient's account on that date.[12] According to Newell, Storm actually received such cash equivalent awards from dividends paid in 2013.[13]

Screenshots of the Fidelity website which explain how an employee could accept award grants demonstrate that for a person to accept them, she must first select that she will accept the grant from a list of "Unaccepted Grants."[14] She would then navigate to a page which explained more fully how to accept them. Therein, a box, titled "Grant Terms and Agreement, " states that "[y]ou must read your Grant Agreement and review the terms to continue." Below that is a hyperlink to a "Grant Agreement (PDF)" which the user can click to review the agreement. Underneath that hyperlink, a checkbox is accompanied by text which reads: "I have read and agree to the terms of the Grant Agreement." Below that, bold text provides: "To complete your Grant Agreement online, you must read and accept the terms outlined in the document posted above. . . . Your grant acceptance will be final once you click Accept. To cancel the transaction, click the Cancel link." "Previous" and "Accept" buttons appear below as does a link allowing the user to "Cancel." Text under the "Accept" button reads "Submit Grant Acceptance."

In 2013, Storm again clicked the "Accept" button on the Fidelity website and again thought that she was only agreeing to terms relating directly to the RSUs and that her agreement would not impact her post-employment obligations to Newell.[15] Storm recalls that she went through the same steps on the Fidelity website to accept the 2013 Agreements as she went through on previous occasions, which included a "pop-up screen appear[ing] along with a lengthy scrolling message which discussed [her] RSU award."[16]

However, the 2013 Agreements, unlike the prior RSU agreements, contained confidentiality provisions[17] and non-solicitation provisions.[18] The agreements also included language through which the assenting party acknowledged that: (a) the confidentiality and non-solicitation restrictions are reasonable; (b) her ability to work and earn a living are not impaired by the restrictions; and (c) that Newell will suffer substantial damage for which no adequate remedy at law exists as a result of a breach of the restrictions.[19] The 2013 Agreements also contained Delaware choice of law provisions and forum selection clauses requiring that suits between Newell and Storm be litigated in Delaware.[20]

According to Storm, Newell asked other employees more directly to sign post-employment restrictive covenants. For example, employees in Newell's Exton, Pennsylvania office who were similarly situated to Storm were given paper copies of the 2013 RSU agreement which also contained answers to frequently asked questions.[21] Similar restrictive covenants were imposed on higher-level employees, such as Newell's President, through employment contracts, instead of through RSU award agreements.[22] Other employees also agreed to similar provisions in separation agreements.[23]

Newell alleges that Storm was the "face" of Newell at Target for the sale of infant and juvenile goods and that during Storm's last two years of employment she was involved primarily in selling to, developing sales strategy for, and maintaining the Company's relationship with Target.[24] Storm was directly responsible for over $100 million in sales to Target in 2013.[25] Storm had access to confidential information and trade secrets regarding product pricing, marketing strategies, platform innovation, and business incentives, among other things.[26] She also had access to information about Newell's relationship with Target and access to information relating to the sale of Graco products to other retailers and distributors.[27]

When Storm was contemplating leaving Newell, she searched both her personnel file and her "Employee Connections" page, which contains employment-related information such as compensation and company policies, before she resigned.[28] Those efforts did not uncover any restrictions on subsequent ...


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